Gold Co. Continues Progress Toward Mine Restart
Research Report

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West Red Lake Gold Mines Ltd. (WRLG:TSX.V; WRLGF:OTCQB) provided operational updates for its past-producing Madsen mine in Ontario's West Red Lake gold district, reported Velocity Trade Capital Analyst Paul O'Brien in a Feb. 13 research note.

"[The company] has advanced the mine in a rapid and methodical manner since acquisition" in June 2023, O'Brien wrote. "We estimate production commencement in Q3/25, ramping up to 800 tons per day throughput."

56% Return Possible

Velocity reiterated its CA$1.25 per share 12-month price target on the gold company, currently trading at about CA$0.80 per share.

These figures suggest a 56% potential return for investors.

West Red Lake Gold remains rated as Outperform.

Bulk Sample Extraction Underway

O'Brien reported what West Red Lake Gold has achieved so far in terms of preparing Madsen for a mine restart and target dates for completion of each.

Of the 10,000-ton bulk sample the company has identified for use in comparing modeled and actual mine resources, it has extracted 3,380 tons so far, completing two of the six stopes, O'Brien noted. The other four stopes will be drilled and blasted over the coming weeks.

"Initial results are favorable with regards to mining dilution," O'Brien wrote.

The total sample will consist of material from three mining areas: McVeigh's 1407, Austin's 1099/1100 and South Austin's 987. Two third-party contractors will audit West Red Lake Gold's sampling and stoping, along with processing plans and operations.

Connection Ramp Nearly Done

Also, reported O'Brien, West Red Lake Gold has completed about 80% of construction of the ramp connecting Madsen's east and west areas. This equates to about 1,148 meters (1,148m) done of the total 1,440m length. The company is on track for finishing the ramp by the end of March 2025.

O'Brien explained the connection ramp, "a key infrastructure item," will provide improved ore access and handling and shorten the distance to the mill. The ramp is West Red Lake's largest capital expense for restarting mining operations, requiring about CA$10 million (CA$10M) of the total budgeted capex of CA$44M.

West Red Lake Gold is targeting the end of February for starting the mill, O'Brien relayed, after two years of being shut down. The company will start feeding it low-grade, legacy material then switch to low-grade material mined at Red Lake. Once the mill is recommissioned, bulk sample testing will begin, with results following, likely in March.

Many Catalysts in 2025

In his report, O'Brien presented West Red Lake Gold's many events slated to occur this year. By the end of February, West Red Lake aims to start the Madsen mill and then test the bulk sample. The results of this testing would come sometime in March. At the end of March, the company should finish constructing the connection ramp. In April, the explorer-developer plans to process the bulk sample through the mill. In late 2025-early 2026, West Red Lake Gold intends to reach commercial production at Madsen, "potentially resulting in a rerating," noted the analyst.

Regarding the company's Rowan property, plans call for drilling it later this year and then completing a preliminary economic assessment of expanding the former gold mine there.

High Leverage to Gold Price

According to the January 2025 prefeasibility study of Madsen, O'Brien reiterated, the mine will produce an average of 67,600 ounces of gold per year at an all-in sustaining cost of US$1,681 per ounce (US$1,681/oz).

The analyst presented the forecasted net present value West Red Lake and Velocity each has on Madsen, using a US$2,200/oz gold price. West Red Lake's estimated NPV is CA$315M with a 255% internal rate of return. Velocity's estimated NPV is higher, at CA$468M.

The gold price today, of about US$2,900/oz, would take the NPV 76% higher, to CA$823M.